Property Investment Tips: Budgeting for your investment

By the resi financial blog team, 07 October 2014

There's a lot more to financing your investment property than making sure you have a deposit and enough money to cover mortgage payments. Effective budgeting can be the difference between a profitable investment and a financial nightmare.

Whether your intention is a cash flow positive money earner, or a negatively geared capital gain long-term plan, there are certain ways to make sure you are making the most of your money.

Balance incoming and outgoing money

Firstly, insurance. Don't make the mistake of being tempted to under-insure to save money on premiums. Although there could be a short term saving, your tenants are not necessarily as careful and thoughtful with your property as you are, and you could find yourself in dire straits if they unfortunately start a grease fire or damage your property in some other unforeseen way.

Asking for the right amount of rent is a careful balancing act. If you advertise a property with a higher rent than it deserves, you will most likely find that you have extended vacancy periods, costing you money in the long run, even if the weekly figure is high. Don't under price, either, or else you might give away some of the profit on your investment.

Prevention is the best cure

Do your maintenance on time. Putting off a leaking gutter can save you money this month, but if that water gets into the wall cavity, it will be an endless headache. Timely and well-conducted maintenance can make the difference between a property that is profitable, or a veritable money sink-hole. This kind of maintenance will also stand you in good stead if you are planning to sell your investment property at a profit further down the line.

And lastly, budget for a worst-case scenario. When you plan your income and expenses for the year, make sure you work in a couple weeks of possible vacancy. It also doesn't hurt to have a small slush fund for unexpected bills, or maintenance that is too small to claim on insurance